Thoughts From the Frontline, April 2020
March 27, 2020
Unprecedented events are happening so fast, I barely know where to start. But let’s begin with a small one, noticeable perhaps only to me.
March 20, 2020
In the film version of Tolkien’s Lord of the Rings: Return of the King, there’s a three-minute scene you should watch or re-watch. It is relevant to our situation today. Gondor needed to light the beacons for aid.
March 19, 2020
This is a short midweek note, something I haven’t done for years. But as we all know, these are very special and difficult times.
March 13, 2020
I write this letter early Friday morning after a week in New York visiting with many fellow market participants. And lots of phone calls, both to analysts and medical experts. I had originally planned a completely different letter but circumstances changed.
March 6, 2020
In baseball, there is a kind of pitch called the “changeup,” designed to look like a fastball while actually going slower. The deceived batter swings too soon and misses. Strike, you’re out. The world has thrown a wicked biological changeup at the global economy.
February 28, 2020
For the last 3+ years, I have maintained it would take an “exogenous” event to send the United States into recession. Historically suboptimal growth? Sure, but sub-3% growth isn’t a recession.
February 21, 2020
As I write this, a self-proclaimed “democratic socialist” is leading the race for one of our major parties’ presidential nomination. The fact that so many Americans (especially young Americans) support Bernie Sanders ought to tell us something. A Quinnipiac poll out this week showed Senator Sanders with 54% support among Democrats age 18–34. Meanwhile, 50% of adults under 38 told the Harris Poll last year that they would “prefer living in a socialist country.”
February 14, 2020
The welfare of a nation can scarcely be inferred from a measure of [GDP].”
—Simon Kuznets (who developed GDP), 1934
February 7, 2020
Economists and investors are rightly obsessed with growth. We always want more of it. We worry it won’t come or, worse, might turn into contraction. Economists of all stripes, from Paul Krugman to Lacy Hunt, recognize economic growth cures all manner of ills.
January 31, 2020
Regular readers know I often criticize so-called “experts,” usually economists or central bankers whose flawed decisions are punishing the rest of us. I find their expertise is not nearly as reliable as they seem to think.
January 24, 2020
The human brain excels at taking shortcuts. Processing all the information our senses collect takes a lot of energy, so repetitive data gets lower priority. Things we see often fade into the background so we can notice new stuff.
January 17, 2020
We haven’t had a lot of good news lately. Or, more precisely, we haven’t seen a lot of good news lately, though it does exist. We don’t see it because both regular media and social media usually focus on the bad.
January 10, 2020
If living dangerously is your goal, just keep adding reasonable, manageable, prudent risks. Eventually they’ll add up to serious danger.
January 3, 2020
Welcome to the 2020s. Some weren’t sure we would make it this far, but we did. Now we face a new decade and new challenges. How we handle them will determine what kind of conversation we have in 2030.
December 20, 2019
Ignoring problems rarely solves them. You need to deal with them—not just the effects, but the underlying causes, or else they usually get worse. The older you get, the more you know that is true in almost every area of life.
December 13, 2019
We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win.
December 6, 2019
According to the dictionary, the word angst refers to “a feeling of deep anxiety or dread, typically an unfocused one about the human condition or the state of the world in general.” It comes from a German word for “fear.”
November 27, 2019
We’ve reached the Thanksgiving weekend, and as always, I’m thankful for loyal readers like you. I hope you are enjoying some quality time with family and friends.
November 22, 2019
Those who experienced the 1930s as adults are mostly gone now, but they left notes. We have a pretty good record of what that period was like. It wasn’t fun to begin with—then it got worse.
November 15, 2019
Nothing is forever, not even debt. Every borrower eventually either repays what they owe, or defaults. Lenders may or may not have remedies. But one way or another, the debt goes away.
November 8, 2019
If you are a computer (other than the newest experimental quantum ones), your world is entirely binary. Everything is some combination of zeroes and ones. The machines can do marvelous things with those two digits but they have limits.
November 1, 2019
Every investment decision should have an exit strategy. What will you do if your idea doesn’t work? Ideally, you make that decision before you invest. Mistakes are inevitable but survivable if you recognize them quickly and act to minimize their costs.
October 25, 2019
And once you see it, you cannot unsee it.
October 18, 2019
“In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
October 11, 2019
Life would be so much easier if we didn’t have to worry about our financial futures. Though I suppose we don’t have to worry. Animals don’t. Squirrels instinctively store away nuts and thus live through winter without much thought.
October 4, 2019
I’m filing this letter on the day I turn 70 which, among other things, means I start receiving Social Security benefits this month.
September 27, 2019
I often say a writer is nothing without readers. I am blessed to have some of the world’s greatest. Your feedback never fails to inspire and enlighten me.
September 20, 2019
“Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”
―John Maynard Keynes
September 13, 2019
Scientists say the rules change in a cosmic “black hole” at what astrophysicists call the event horizon. How do they know that? Not by observation, since what happens in there is, by definition, un-seeable. They infer it from the surroundings, which say that the mathematics of the universe as we understand them change at the event horizon.
September 6, 2019
“The best way out is always through.”
“History doesn't repeat itself, but it does rhyme.”
It will not shock you when I say we live in confusing times. Odd, seemingly inconsistent events and decisions don’t bring the expected results. Once-reliable rules don’t work. This makes it hard to chart a personal and business path forward.
August 30, 2019
We have reached Labor Day weekend which, in the US, is a holiday for honoring work and workers. If you’re a Baby Boomer like me, you also grew up knowing school was about to start again. We didn’t do the mid-August thing back then. The first day of school was the day after Labor Day. That meant entering a new grade with unknown challenges.
August 23, 2019
Good news: The trade war is over. No, it’s getting worse. Or maybe it is ending but it could start again tomorrow.
August 16, 2019
I am back from my 14th annual Maine fishing camp and the mood was decidedly different this year. The private event at Leen’s Lodge is generally called Camp Kotok in honor of David Kotok of Cumberland Advisors who started these outings many years ago. CNBC and others began calling it the “Shadow Fed” but it is really just a meeting of wickedly smart people focused on economics and markets. (I am allowed to attend for comic relief.) Throw in a little fishing, more fabulous food and wine than...
August 9, 2019
I have a special treat for you. I’m at Camp Kotok, the annual economics/fishing retreat in Maine. Knowing internet connectivity would be scarce here, I asked good friend Larry Kotlikoff to be your guest writer this week.
August 2, 2019
One reason the economy is so fascinating is the way things just… happen. Growth blossoms if everyone just follows their own incentives and nothing gets in the way. The courage, vision and passion of entrepreneurs and those who risk their money backing them is one of the most inspiring aspects of modern civilization. Adam Smith’s Invisible Hand of now tens of millions of businesses, small and large and giant, working to produce and deliver inventions, technologies and cures that help us all....
July 26, 2019
As I work on my book about the future, I think a lot about the ways possible events will affect our money. But I’m also thinking about something else: What kind of money will we use?
July 19, 2019
I’m often asked if recession is coming, and for quite different reasons. Some people worry about their investments. Others are worried about their employment or their kids. Political types wonder if and how recession could affect the next election.
July 12, 2019
This is the final letter of the six-part series of my reply to Ray Dalio’s essays. Here are some links to help you wrap it all together.
July 5, 2019
“The belief that wealth subsists not in ideas, attitudes, moral codes, and mental disciplines but in identifiable and static things that can be seized and redistributed is the materialist superstition. It stultified the works of Marx and other prophets of violence and envy. It frustrates every socialist revolutionary who imagines that by seizing the so-called means of production he can capture the crucial capital of an economy. It is the undoing of nearly every conglomerateur who believes he...
June 28, 2019
This week is the fourth in a series of five open letters responding to a series of essays by Ray Dalio, the founder of Bridgewater Associates. His original letters are Why and How Capitalism Needs to Be Reformed, Parts 1 and 2 and It’s Time to Look More Carefully at ‘Monetary Policy 3 (MP3)’ and ‘Modern Monetary Theory (MMT)’. My replies are here, here, and here. Today I continue my response.
June 21, 2019
Two weeks ago I started a mini-series in the form of an open letter responding to a series of essays by Ray Dalio, the founder of Bridgewater Associates. I wrote here and here that he was kinda, sorta wrong in Why and How Capitalism Needs to Be Reformed, Parts 1 and 2 but really, really wrong in It’s Time to Look More Carefully at ‘Monetary Policy 3 (MP3)’ and ‘Modern Monetary Theory,’ in which he basically endorsed MMT. Today I continue my response.
June 14, 2019
Last week we started a mini-series in the form of an open letter responding to a series of essays by Ray Dalio, the founder of Bridgewater Associates. I wrote that he was kinda, sorta wrong in Why and How Capitalism Needs to Be Reformed, Parts 1 and 2 but really, really wrong in It’s Time to Look More Carefully at ‘Monetary Policy 3 (MP3)’ and ‘Modern Monetary Theory,’ in which he basically endorsed MMT. Today I continue my response.
June 7, 2019
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”
—John Maynard Keynes
May 31, 2019
Publisher’s Note: John Mauldin is recovering from a minor illness. He’ll be back next week. Meanwhile, with trade disputes still roiling markets, below is a still-timely letter he wrote last year. You should definitely read it again. —Ed D’Agostino
May 24, 2019
Modern technology was supposed to make travel less necessary. We can meet by phone, video, and now in virtual reality. But we’re still traveling more than ever. I certainly am.
May 17, 2019
There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, “Morning, boys, how’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, “What the hell is water?”
—David Foster Wallace, This Is Water
May 10, 2019
One difficulty in analyzing our economic future is the sheer number of potential crises. When so much could go wrong (and really right, when the exponential technologies I foresee get here), it’s hard to isolate, let alone navigate, the real dangers. We are tempted to ignore them all. Ignoring them is usually the right response, too. We can “Muddle Through” almost anything.
May 3, 2019
My recent letters described what I think the future will look like. I hasten to add, it isn’t what I think the future should look like or what I want to see. Almost the entire developed world has painted itself into a corner.
April 26, 2019
The US, Europe, and most of the developed world on are the road to Japanification. Like I wrote last week, we will see financial repression, ever increasing deficits, slower growth, etc. Essentially, the rest of us will begin to look like Japan with its astronomical deficits and ultra-dovish monetary policy.
April 19, 2019
“But the emperor has nothing at all on!” said a little child.
April 12, 2019
Regular readers may have noticed me slowly losing confidence in the economy. Your impression is correct and there’s a good reason for it, as I will explain today. The facts have changed so my conclusions are changing, too.
April 5, 2019
Recession is coming. We can debate the timing, but the economy will turn decisively downward at some point. My own analysis, looking at the data available on April 4, says recession isn’t likely this year but unfortunately looks very probable in 2020.
March 29, 2019
This month, the Federal Reserve joined its global peers by turning decisively dovish. Jerome Powell and friends haven’t just stopped tightening. Soon they will begin actively easing by reinvesting the Fed’s maturing mortgage bonds into Treasury securities. It’s not exactly “Quantitative Easing I, II, and III,” but it will have some of the same effects.
March 22, 2019
Matching the stock market’s long-term average returns sounds like it should be easy, if you’re patient enough. But in fact it is remarkably difficult. In last week’s letter, Ed Easterling and I showed you why it is a longshot bet in almost every market environment. Returns over a decade or two are usually well above or well below average. Most of all, it’s fairly predictable which side of average will occur.
March 15, 2019
Last week, I described the enormous challenges retirees face. One reason for that, aside from insufficient savings, is that markets haven’t delivered the returns many experts said we could plan on.
March 8, 2019
I have long said I don’t want to retire. I enjoy my work. It’s not too physical, other than the travel (which is finally beginning to wear on me). Also, my savings are not yet sufficient to sustain the retirement lifestyle Shane and I want. I could retire now but would rather wait.
March 1, 2019
In an ideal world, we wouldn’t have to read the Federal Reserve’s rabbit entrails to discern the economy. But Since the Fed exists in the real world, and its decisions matter, we have to pay attention.
February 22, 2019
An old joke says economists predicted 15 of the last 10 recessions. In other words, they’re frequently wrong and often too pessimistic.
February 15, 2019
More than 10 years ago some Australian readers begin regaling me with the ideas of economist Bill Mitchell of the University of Newcastle in New South Wales. He was teaching about something he called (and he coined the term) Modern Monetary Theory. I looked into it and fairly quickly dismissed it as silly. Actually printing money as an economic policy? Get serious.
February 8, 2019
The Soviet Union’s collapse and spread of semi-free markets through Eastern Europe seemingly ended the socialism vs. capitalism argument. Capitalism had won. Collectivist economies everywhere began turning free. Even communist China adopted a form of free market capitalism although, as they say, with “Chinese characteristics.”
February 1, 2019
“Plans are worthless, but planning is everything.”
—US President Dwight D. Eisenhower
January 25, 2019
"To be absolutely certain about something, one must know everything or nothing about it."
January 18, 2019
The production of souls is more important than the production of tanks.... And therefore I raise my glass to you, writers, the engineers of the human soul.
January 11, 2019
For a couple of years now, the economic narrative has shown a comparatively strong US against weakness in Europe and some of Asia (NOT China). The US, we are told, will stay on top. I agree with that, as far as it goes... but I’m not convinced the “top” will be so great.
January 4, 2019
Double, double, toil and trouble;
Fire burn and cauldron bubble.
…By the pricking of my thumbs,
Something wicked this way comes.
- William Shakespeare, Macbeth, Act IV, Scene I, 1606
December 28, 2018
A winters day,
In a deep and dark December…
“Wait, it doesn’t feel like winter. It’s not deep and dark, and it’s actually warm, and the sun is shining.
Toto Shane, I don’t think we’re in Kansas Texas anymore.”
December 21, 2018
We have reached the best time of year, when we can look to the future with hope. We can stop wondering what will happen in 2018 and look forward to 2019. The investment industry always does this enthusiastically, as you will see in forecasts everywhere the next few weeks.
December 14, 2018
Everybody is suddenly talking about the inverted yield curve. They’re right to do so, too, but alarm bells may be premature. Inversion is a historically reliable but early recession indicator. The yield curve isn’t saying recession is imminent, even if it were fully inverted, which it is not.
December 7, 2018
Someone asked recently how many times I had “crossed the pond” to Europe. I really don’t know. Certainly dozens of times. It’s been several times a year for as long as I remember.
November 30, 2018
In an increasingly divided world, we all share one great desire: self-preservation. Not just humans, either. The survival instinct exists in almost every living thing. Humans simply have greater ability to do something about it.
November 23, 2018
The selloff in GE is not an isolated event. More investment grade credits to follow. The slide and collapse in investment grade debt has begun… (and later) Don’t be fooled by bond prices holding up, because trading volumes are down. There are fewer bids in the market, and the dispersion of bids is wider. It is time to jog—not walk—to the exits of credit and liquidity risk.
- Scott Minerd, Guggenheim Partners Chief Investment Officer
November 16, 2018
Science tells us energy can neither be created nor destroyed within a closed system. Whatever amount is there will stay the same, though it might change form. If only the same were true for debt.
November 2, 2018
But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren’t certain that you understand and can value your business far better than...
October 26, 2018
Is debt good or bad? The answer is “Yes.”
October 19, 2018
Today, rather than tackle some big macroeconomic issue, we’ll go back to this letter’s roots and look at market timing and portfolio construction issues. I expect this will get both enthusiastic support and at the same time, make a number of readers uncomfortable—if not annoyed.
October 12, 2018
An odd aspect of being a writer is you never know in advance what will excite readers. I’ve written letters I thought very provocative only to draw mostly yawns.
October 5, 2018
I have to confess something: I run a huge trade deficit. It’s not with China or Mexico, but with Amazon. I buy all sorts of goods from them and Jeff Bezos has yet to spend a penny with me. It’s just not fair.
September 28, 2018
“A conservative is someone who stands athwart history, yelling stop, at a time when no one is inclined to do so, or to have much patience with those who so urge it.”
September 14, 2018
Economic reality isn’t black and white. At any given time, both good things and bad things are happening. Ignoring one side because it doesn’t fit your preferred outlook is an excellent way to go badly wrong.
September 7, 2018
Hardly a day passes without some sort of China news in the financial headlines. There’s a good reason, too. China is the global economy’s 600-pound gorilla, second in size only to the US. Yes, it was largely a copycat business economy up until the early 2000s, but Chinese entrepreneurs have really taken charge in the last 10 years. Fueled by the profits from huge consumer demand, they are expanding not only in China but globally. This story is largely ignored in the US and in much of Europe. We...
August 31, 2018
“How did you go bankrupt?”
“Two ways. Gradually, then suddenly.”
―Ernest Hemingway, The Sun Also Rises
August 24, 2018
Back in 1936, in Esquire magazine of all places, F. Scott Fitzgerald wrote something profound. “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”
August 17, 2018
In my business, there is a fine line between standing by your conclusions and being unwisely stubborn. But no matter what I say, people will still label me a perma-bear or perma-bull—often at the same time. It’s an occupational hazard to which I am accustomed.
August 10, 2018
I’m back from Camp Kotok. As always, it was both rejuvenating and enlightening. The Maine woods, lakes, and general environment encourage more candor than I see most places. This, combined with David Kotok’s talent for assembling a diverse group and the always-marvelous Maine hospitality, made it another great success. It helps that David aggressively enforces Chatham House Rules and the Jackson Hole Rule. So you really don’t have to worry what you say.
August 3, 2018This week I have something special for you: an update of “The Distribution of Pain,” one of 2017’s most popular letters. I say “popular” just in terms of feedback and reprint requests. It was thought-provoking but also sobering. I started with the original version, re-edited to clarify a few points, and added some new comments. It is still a timely, important topic.
July 27, 2018
We are all on a debt-filled train that is eventually going to crash, and if you are on it, it won’t stop to let you off first. Jumping at the last minute is not a good option, either. So what do you do? You take action now, while you have time.
July 20, 2018
Standing in front of a speeding train is rarely a good idea, but most investors are doing it right now. They survive only because the debt train is still way down the tracks. It is nonetheless coming, and you will want to move before then. But which way?
July 13, 2018
We are approaching the end of the debt Train Wreck series. I’ve spent several weeks explaining why I think excessive debt is dragging the world economy toward an epic crash. The tracks ahead are clear for now but will not remain so. The end probably won’t be pretty. But there’s good news, too: we have time to get our portfolios, our businesses, and our families prepared.
July 6, 2018
I hope everyone had a happy Fourth of July, whether it was a holiday for you or not. The United States’ birth as an independent nation was, among other things, an economic event that changed history far beyond our borders. We hope and believe it was for the better.
June 29, 2018
In describing the global debt train wreck these last few weeks, I’ve discovered a common problem. Many of us define “debt” way too narrowly.
June 22, 2018
Italian dictator Benito Mussolini at least made the trains run on time, according to legend. But other sources say the nation’s railway system remained horrible under his rule (see here, here, and here).
June 15, 2018
In describing various economic train wrecks these last few weeks, I may have given the wrong impression about trains. I love riding the train on the East Coast or in Europe. They’re usually a safe and efficient way to travel. And I can sit and read and work, plus not deal with airport security. But in this series, I’m concerned about economic train wrecks, of which I foresee many coming before The Big One which I call The Great Reset, where all the debt, all over the world, will have to be...
June 8, 2018
Rather go to bed without dinner than to rise in debt.
What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?
There are no shortcuts when it comes to getting out of debt.
Modern slaves are not in chains, they are in debt.
Debt isn’t always a form of slavery, but those old sayings didn’t come from nowhere. You can find hundreds of quotes on the Internet discussing the problems of debt....
June 1, 2018
Train wrecks and their financial analogues are a worldwide phenomenon. Europe, as I have written for several years, remains a giant accident waiting to happen—as Italy reminded us last week. You may have noticed the results when US trading resumed Tuesday. A wider crash may not be imminent but is certainly possible and will have worldwide effects if/when it happens. So now is a good time to review what’s already happened and what could be coming.
May 25, 2018
My still-unfolding Train Wreck series is getting a lot of attention. It’s not exactly good news, but people at least appreciate the warnings. Thanks to all who sent thought-provoking comments. I always consider them carefully.
May 18, 2018
Today we will summarize something I’ve been thinking about for a long time. Exactly how will we get from the credit crisis, which I think is coming in the next 12–18 months, to what I call the Great Reset, when the global debt will be “rationalized” via some form of nonpayment. Whatever you want to call it, I think a worldwide debt default is likely in the next 10–12 years.
May 11, 2018
In last week’s letter, I mentioned an insightful comment my friend Peter Boockvar made at dinner in New York: “We now have credit cycles instead of economic cycles.” That one sentence provoked numerous phone calls and emails, all seeking elaboration. What did Peter mean by that statement?
May 4, 2018
Since last week’s letter, I have flown enough to send me over 100,000 miles on American Airlines this year and make Executive Platinum. That is not necessarily a good thing. But wow, I learned a lot between all those flights.
April 27, 2018
Getting a fever is no fun. You likely get chills, you sweat, and you’re just generally uncomfortable. You get tired easily and need to rest. But here’s the weird part: Fever isn’t the real problem. It’s a symptom of something else. You must treat whatever that is to relieve the fever.
April 20, 2018
Photo: Getty Images
China is the world economy’s elephant in the room. We can’t possibly ignore it, yet many try anyway. Admitting China’s influence forces us to admit the world is changing—and we all must change with it.